1.

The validity of the provisions in three Community regulations, Regulations Nos 102/64, 120/67 and 473/67, which provide that the issue of an import or export licence for the products covered by the basic Regulation No 19 is subject to the lodging of a deposit and that, except in the case of force majeure, the deposit is forfeited if the transaction is not carried out by the holder of the licence;

2.

In one of the cases, 30/70, the validity in Community law of Regulation No 87/62 and the organization by a Member State of this system of deposits as from 30 July 1962, that is to say, before the intervention in 1964 of the first Community regulation laying down the system of deposits for the whole of the Community.

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those which relate to what I shall call the external legality of the provisions in dispute, that is to say, the power of the Community authorities to issue them and the correctness of the procedure by which they were adopted ;

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those which relate to the internal legality of those provisions in respect of which the essence of the complaint is the violation of a so-called principle of proportionality which is alleged to bind the Community authorities ;

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finally, those which relate to the validity of Regulation No 87/62, to the compatibility with Community law of the system instituted in Federal Germany before the appearance of Regulation No 120/64.

(1)

The lack of competence of any Community institution whatever to issue them;

(2)

The incorrectness of the procedure of drawing up the regulations and in particular of the intervention of the Management Committees ;

(3)

Finally and subsidiarily, the particular defects which are alleged in any case to vitiate the external legality of only some of the disputed provisions.

1.

The first of these arguments is that the provisions create an obligation to import or export, that is to say, an obligation to act, whereas no provision of the Treaty permits the Community authorities to impose such an obligation on individuals.

This argument need not detain us.

First, the question whether or not certain provisions of the Treaty, in particular those relating to agriculture, authorize the Community institutions to impose obligations to act on traders in certain circumstances is full of uncertainty and if it were necessary to give an answer I should be inclined at first sight to rely in the affirmative.

But in reality the question, in my opinion, does not arise in this case. In fact, the disputed provisions do not really create any obligation to import or export.

The sole purpose of these provisions is to provide that the licence may be requested only in order actually to carry out an import or export transaction and not merely frivolously. In doing so they are not creating an obligation, but are merely imposing a condition on the issue of a document necessary for the transaction upon which the trader has already decided.

Obviously, an importer or exporter is free not only not to request an import or export licence, but even not to carry out the import or export which he has stated his desire to effect. In such a case, certainly, he forfeits his deposit, but his freedom of action, although it may clearly be influenced by this factor, remains no less complete in law. Thus the system does not create an obligation to act but merely imposes a condition on the grant of a permission to act.

2.

The second argument advanced in support of the claim of complete lack of competence of the Community institutions to issue the disputed provisions deserves deeper examination.

It is submitted that this system, which obliges those who apply for an import or export licence to lodge a deposit and which provides that such deposit is, save in the case of force majeure, forfeited where the transaction is not carried out within the period prescribed in the licence, constitutes in practice the institution of a system of penalties.

The Court is assured that the Member States have not as a general rule entrusted penal powers to the Community institutions, except in the cases expressly provided for in the Treaty, as for example for cartels or the abuse of a dominant position in Article 87 (2) (a), which provides expressly for fines and periodic penalty payments. It is first of all extremely disputable to state that the Treaty does not give the Community institutions the power to decree penalties except in those cases expressly provided for by it.

In agricultural matters in particular, Article 40 (3) lays down that the common organization of the markets may include all measures required to attain the objectives set out in Article 39. It may legitimately be asked whether or not such a wide formula includes the possibility of instituting pecuniary sanctions to ensure compliance with the Community regulations.

But I do not consider that the Court has to settle the question in this case, as in my opinion it will be sufficient to examine and determine the legal nature of the deposit provided for by the provisions in order to find that its forfeiture has in no way the character of a penalty.

It should first be noted that the word deposit (caution, cautionnement) in contemporary French has an ambiguity which commentators have long emphasized, sometimes suggesting that it be removed.

Up to the middle of the nineteenth century, the word cautionnement had only one meaning: that given to it by Article 2011 of the French Civil Code, the old fidejussio of Roman law, that is to say, the undertaking whereby a third party intervenes in the relationship between creditor and debtor to guarantee to the creditor that he will carry out the obligations of the debtor if the debtor fails to do so.

But another meaning of the word caution very quickly appeared, which has sometimes been called ‘administrative’caution and which means the compulsory lodging of a sum of money before being able to carry out certain acts or exercise certain functions in order to guarantee any liabilities which may follow, in particular with regard to public authorities.

This latter type of cautionnement, which from the point of view of civil law is related rather to a pledge (nantissement) is very different from the fidejussio which the cautionnement had as its first meaning.

But these two forms of cautionnement may be combined, for example, as is often the case in practice, when the caution nantissement, to coin a phrase, is itself guaranteed by a fidejussio, usually a bank.

But what really is a caution nantissement? In my opinion, it is nothing other than a form of security intended to guarantee compliance with undertakings entered into previously or at the same time.

The institution of a security is clearly only with difficulty capable of being assimilated to the institution of a penalty. A penalty is intended to punish. A security is intended to prevent and possibly to recompense.

The submission made against the disputed provisions and based on the allegation that the Community authorities are not competent to institute penalties thus in my opinion fails ‘on the facts’, since those provisions did not institute a system of penalties but a system of securities.

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because it confers on the Management Committee a right to take part in the legislative work of the Commission;

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because it gives to the Member States the possibility of obtaining from the Council a ‘quashing’(cassation) of the regulations of the Commission.

(1)

The Council has institutionally not only a general and basic legislative power, but also the power itself to issue the implementing provisions which are necessary for the application of the general rules which it lays down.

(2)

This power of implementation may be exercised by the Council itself or conferred by it upon the Commission.

(3)

No provision limits the right of the Council to use or not to use the power which is available to it by virtue of this provision or prohibits it from fixing the circumstances in which the Commission will exercise the powers delegated to it.

(1)

The Council entrusts to the Commission, and to it alone, the task of taking measures to implement a basic regulation.

(2)

However, it provides a limit to this delegation.

1.

The Council, when it confers executive powers on the Commission under Article 155 for the implementation of the rules which it lays down, is entitled to make the grant of these powers subject to certain conditions as to the way in which they shall be exercised.

2.

There is no subordination of the Commission to the Management Committee since the Commission remains in sole control of its proposal.

3.

There is no transfer of powers from the Commission to the Council since under the Treaty it is the latter which may grant their exercise to the Commission.

4.

Finally, the Council would transgress the limits laid down for it in the Treaty only if it conferred on the Management Committees some power of decision, which is not the case here.

A procedure which reserves to the Council itself the right to decide in the final resort should on the other hand be regarded as compatible with the Treaty.

Finally, as regards the rights of Parliament, it is certain that the Management Committee procedure instituted by Regulation No 19 does not of itself interfere with the powers of Parliament.

To be sure of this it is only necessary to reread the resolution adopted on 3 October 1968 in which Parliament recognized the existence and legality of this procedure whilst fixing the political and legal limits for its use.

I consequently think that the Management Committee system instituted by Article 26 of the basic Regulation No 19 is contrary neither to Article 155 of the Treaty nor to the institutional balance set up by it.

One final point remains. It was argued before the Verwaltungsgerichtshof of the Land of Hesse, which questions you on this point, that this procedure is contrary to Article 189 of the Treaty, which sets out the different categories of measure which may be issued by the Commission or the Council: regulations, directives, etc.

I find it difficult to understand the drift of this submission, which was not pursued before the Court in the oral proceedings by those who had originally raised it.

As soon as Article 155 of the Treaty gives the Council the power to confer on the Commission the power to take measures to implement the rules which it has decreed, it follows impliedly and necessarily that the Commission must give to those rules the form which corresponds to their legal nature — regulation or directive — and that the Council will adopt the same form if it is led to repeal or amend a provision drawn up by the Commission.

To sum up, I thus propose that you say that the Management Committee procedure laid down by Article 26 of Regulation No 19 whereby the disputed regulations were issued complies with the Treaty inasmuch as the Council only conferred on the Commission the power to issue regulations to implement basic, regulations issued by itself.

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The first paragraph imposes the requirement for every import and export of any product covered by Article 1 of Regulation No 19 that a licence be issued to the trader.

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The second paragraph is solely devoted to the import licence for grain. It lays down the period of validity of the licences and the procedure for changing that period.

Lastly, and above all, it lays down that the issue óf the licence is subject, to the lodging of a deposit which guarantees the undertaking to import during the period of validity of the licence and that the deposit is forfeited should. the importation not be carried out within that period.

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The third paragraph refers finally to the procedure laid down in Article 26, that is to say, that of the Management Committee, for determining the methods of implementation of the whole of the article, especially, it states, for determining the duration of the import licences for all the products falling within the field of application of Regulation No 19.

(1)

It is the provision alone which should be taken into account in settling the question, for there are no preparatory studies for this basic regulation which are capable of binding the Court in its interpretation.

(2)

Article 16 (1) unequivocally sets out the principle of the obligation on the trades to obtain for every import or export of every product listed in Article 1 of that regulation, that is, both grain, cereal products and processed products, an import licence or an export licence.

(3)

The third paragraph of that article expressly confers on the Commission the task of laying down, in accordance with the procedure prescribed in Article 16, the procedure for implementing the general rules imposed in paragraph (1). I think that the institution of the deposit is really only the definition of one of the conditions necessary for the issue of the import and export licences referred to in Article 16 (1), that is to say, a means of implementation of that article.

(1)

that of the Frankfurt court, which states that since the principle of proportionality results from the combined effect of Articles 2 and 12 of the Basic Law of the Federal Republic of Germany, Community measures may not infringe those constitutional provisions, an argument from which that court has drawn all the consequences since, before referring this question to the Court of Justice, it has held invalid, as contrary to the Basic Law, the provisions disputed today before the Court;

(2)

that outlined by the Verwaltungsgerichtshof of the Land of Hesse, which finds the legal source of this principle of proportionality in the unwritten law of the Community, in the general principles of Community law;

(3)

finally that which I suggest to the Court which would in this case find the source of this principle in an express and very clear provision of the Treaty.

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By the general principles of Community law: that has been expressly affirmed by at least two of the Court's judgments: of 29 November 1956 in Fédération Charbonnière de Belgique v High Authority (Rec. 1955 — 1956, p. 304) and of 13 June 1958 in Compagnie des Hauts Fourneaux de Chasse v High Authority (Rec. 1958, p. 190).

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By an express provision of the Treaty: that appears in Article 40 of Title II on agriculture from which it follows that the Common organization of the markets set up to attain the objectives set out in Article 39 may include only those measures required to attain the objectives set out in Article 39.

(1)

the principle of the system of deposits;

(2)

the system in practice.

A —

In its principle I think that not only is this system strictly necessary for the normal functioning of the Community market in cereals and cereal products but that, although capable of improvement, it is probably the least restraining measure that could be imagined to guarantee a correct functioning of that market.

I shall try to demonstrate this by placing the system in the context in which it must be placed for it to be judged.

The organization of the market in cereals has in essence the aim of ensuring a fair standard of living for the European producers while respecting the other objectives set out in the Treaty for the common policy.

It provides powerful support and intervention procedures regarding internal prices.

Each year first of all a target price is fixed, that is to say, the price at which it is hoped that the transactions will take place on the internal Community market.

On the basis of this target price an intervention price is determined, slighty below it so as not to block intra-Community trade. This intervention price is in a certain sense the guaranteed price to the producer.

Its fluctuations constitute one of the elements which set in motion the action of the intervention agencies, either in the form of compulsory purchases without limits as to quantity or by aids to private storage or by indirect means such as denaturing.

It is quite clear that such a system can work only when accompanied and supported by action at the Community frontiers, by action on the external trade in the products. The internal prices of the Community, fixed in relation to social as well as economic objectives, are in fact higher than the world prices which are known, moreover, to be generally artificial and to correspond little to the ideal prices of a perfect market as imagined by the liberal economists of the nineteenth century.

If there were no action at the frontiers of the Community two phenomena would certainly occur:

Whilst the necessity for intervention at the Community frontiers is thus beyond dispute, the choice of means for such intervention has posed a delicate problem for those who had to decide on it.

The simplest solution would have been obviously to reserve to a Community agency or agencies acting on behalf of the Community a monopoly in external trade. Such agencies, knowing the supply situation perfectly, would have imported when there was a shortage, exported at a loss when there was a surplus and sought to recompense on the financial level the opposing results of these two operations.

Another, equally possible, solution would have been, whilst maintaining in principle the freedom of external trade, to fix periodically and on the basis of the internal market situation export and import quotas. These solutions were defended by many specialists and would certainly have ensured with the greatest degree of certainty the necessary control of external trade.

But they were not adopted because perhaps they appeared to the authorities responsible to impose too great restrictions on traders, restrictions which in the eyes of many did not appear absolutely necessary for the attaintment of the aims in view.

So a much more flexible system, the least coercive that could really be imagined, was adopted.

Neither monopoly over imports and exports nor quantity control. A whole system based entirely on the principle oí persuasion and not of compulsion.

For exports, not only freedom to export but, so that that freedom should not remain theoretical, an export subsidy, the ‘refund’ the general effect of which is to cover the difference between the rates or prices of the products in the Community and on the world market.

For imports :

So except in cases of severe crisis the only means to ensure the equilibrium of the market, which Article 39 expressly mentions among the objectives of the common agricultural market, are:

If the supply on the Community market tends to exceed demand the refund is increased to ease disposal of the surpluses. If the demand exceeds supply the levy is lowered to allow the deficit in Community supplies to be made up.

But in order to manipulate the levy or the refund ‘in the right direction’, so to speak, certain data are necessary:

Without the latter information the Community action in external trade would develop in the dark. The Community authority would have good knowledge of the internal imbalances but it would have no knowledge of the decisions of the traders liable to increase or to reduce these imbalances; it would thus not be able to act in the way required by the equilibrium of the market.

That is why it is not only necessary but indispensable, if it is desired to maintain the economic freedom of the importers and exporters, both to subject their transactions to the issue of an import or export licence and to lay down that that document is not just a vague declaration of intent and that the condition for its issue is an undertaking to carry out the transaction decided upon, an undertaking which is guaranteed by a deposit.

Thus, put in its true context, the import and export licence system, the undertaking to carry out the transaction decided upon and the system of deposits which guarantees that undertaking appear in a very different light from that in which it has been sought by some to present them.

It is in no way a system intended to guarantee a sort of purely statistical obligation as the Frankfurt court seemed to think.

It is in no way, as was suggested to the Court the other day, a sort of victimization of traders by bureaucrats desirous of seeing at last the forecasts which they have drawn up match reality.

It is a fundamental datum of the organization of the market in cereals without which the freedom of the traders which it has been the intention to maintain would risk resulting in anarchy and chaos or in requiring the responsible authorities to resort to measures of coercion.

It is also, and this is an aspect of the question which should not be forgotten, a necessary means whereby the increase in outgoings, in the shape of an increase in the refunds, or reduction of income, in the shape of a reduction of the levy, should serve solely the interest of the market, so that the burdens which the States of the Community impose on their citizens to support the common agricultural market do indeed serve that end.

The obligations imposed by this system on importers and exporters are, in my opinion, the minimum ransom, the indispensable ransom for the freedom of action which has been conceded to them.

To be sure, attempts have been made to show to the Court that import and export licences on the one hand and deposits on the other were not indissolubly linked and that one could imagine less coercive measures which would lead to the same results from the point of view of market equilibrium.

One of these procedures is described in the judgment of the Frankfurt court and was defended the other day by counsel for the cereal companies. It is that while retaining the obligation to obtain an import or export licence the obligations of the importer or exporter, if he finally decided not to carry out the import or export originally determined upon, would be restricted to a declaration, under penalty of a fine, of non-importation or non-exportation.

But when the trader sends this declaration to the competent authority the harm would already have been done: the importation previously decided upon and now cancelled would already have been taken into account in judging the market situation.

It would be, if you will allow a popular French saying, ‘to lock the stable door after the horse has bolted’.

It is true that the other day, in the oral proceedings, it was attempted at length to demonstrate that the disputed system was not perfect and did not permit in all cases the complete realization of the objective sought; in other words, that some horses managed to get through the half-open shutters of the stable door.

I can well believe it, but the very imperfections brought out show that only a more coercive system would have been fully effective and that consequently the system being disputed really does constitute the ‘irreducible minimum’, so to speak, of constraints which must be borne by the trader if he wants to retain his freedom to take part in the transactions in question.

I think, therefore, that in principle the system instituted by the disputed regulations, which consists in the attachment to the issue of import and export licences of an undertaking to carry out the transaction decided upon and of a deposit to guarantee the fulfilment of that undertaking, is strictly necessary to the functioning of the common market in cereals as it has been organized and that, consequently, in instituting it the Community authorities did not infringe the provisions of Article 40 of the Treaty.

The Court has already judged in that sense on 11 July 1968 as regards the Community market in milk products in Case 4/68, Firma Schwarzwaldmilch GmbH v Einfuhr- und Vorratsstelle für Fette. It should, in my opinion, give judgment to the same effect for the Community market in cereals.

B —

It remains to examine whether certain of the methods of application of this system are excessive and constitute measures which Article 40 of the Treaty did not authorize the Community authorities to impose on traders.

In this respect, two questions are put to the Court:

In reply to the first query the Court need only, in my opinion, repeat the considerations set out in its judgment in Firma Schwarzenwaldmilch GmbH v Einfuhr- und Vorratsstelle für Fette (Case 4/68) to which I referred just now and which can be summarized thus :

On the second question, the validity of the provisions laying down the repayment of the deposit only in case of force majeure, it was argued before the Court that its rigidity is excessive in view of the aims pursued, that it should be replaced by a more flexible system which took account in particular, of the conduct of the licence holder and the difficulties which he may have experienced in completing the transaction for which he requested the licence. I suggest that the Court reject this argument for two reasons :

Firstly, the Court's definition of force majeure gives great play, greater play than many national legal systems, to the conduct of the importer since it brings into consideration judgment of the character of the forecasts which he has made, his diligence and the sacrifices which he would have had to make in order to complete the transaction at any price.

All these factors thus give the national court a wide margin of discretion and the system is thus not as rigid as some have said.

Secondly and above all, in the reasoning put to the Court on the occurrence of force majeure I find the same basic principle as in the equation of forfeiture of a deposit to a sanction, which I have already proposed that the Court reject.

It is because the forfeiture of the deposit is seen as a sanction that the Court is asked to lay down that it can only be imposed after taking into account all the mental factors, subjective or circumstantial, which explain the non-completion of the transaction for which the licence was issued.

But, as I have said, the system of deposits does not seem to be in any way a system of sanctions. To me it is a system aimed at guaranteeing the execution of an undertaking accepted when the licence is issued and it is therefore with right on their side that the Community authorities decided that only force majeure could excuse one who had accepted the undertaking from complying with it.

To conclude on these questions on the internal legality of the disputed provisions, I think that the system of deposits which they institute is both in its principle and in its detailed application necessary and even indispensable to the proper functioning of the common market in cereals as it has been organized and that the Community authorities, in adopting those provisions, have perfectly respected the obligations resting upon them under Article 40 (3) of the Treaty.

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they were adopted under the so-called Management Committee procedure;

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they are contrary both to certain general principles laid down by the Treaty of Rome and to the provisions of Article 16 of Regulation No 19 of the Council.

1.

As regards that part of the argument relating to the illegality of Regulation No 87 deriving from the fact that it was adopted under the so-called Management Committee procedure, I can but refer to what I have already said.

2.

As regards the incompatibility of the provisions of paragraph (2) of Article 7 of Regulation No 87 with the general principles of the Treaty and of Community law:

3.

As regards the incompatibility of the disputed provisions of Regulation No 87 adopted by the Commission with those of Article 26 of Regulation No 19 adopted by the Council, the arguments raise a more delicate problem.

The third paragraph of Article 16 provides, as the Court will remember, that ‘the detailed rules for the application of this article and the period of validity of the import licence… shall be established according to the procedure laid down in Article 26’, that is, by the Commission after obtaining the opinion of the Management Committee.

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on the one hand, a general provision, that laid down in Article 40 (1) of the Treaty, which provides that the Member States shall develop the common agricultural policy by degrees during the transitional period (and it was during that period that the disputed provision appeared) ;

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on the other hand, a yet more general provision, that appearing in Article 5 (1) of the Treaty, which provides that ‘Member States shall… facilitate the achievement of the Community's tasks’;

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thirdly and lastly, Community Regulation No 19 which applies these principles fully by providing for a progressive establishment of the machinery which it prescribes with the assistance of the Member States, whose powers during this transitional period are progressively transferred.

(1)

The procedure laid down in Article 26 of Regulation No 19 of the Council of 4 April 1962 complies with the Treaty.

(2)

An examination of the questions put to this Court by the Verwaltungsgerichtshof of the Land of Hesse and the Verwaltungsgericht of Frankfurt reveals no factors capable of affecting the validity of Article 7 (2) of Regulation No 87 of the Commission of 25 July 1962 or of Article 1 and 7 (1) and (2) of Regulation No 102/64 of the Council of 13 June 1967 or of Article 9 of Regulation No 473/67 of the Commission of 21 August 1967.

(3)

Article 16 (2) and (3) of Regulation No 19 of the Council of 4 April 1962 does not prevent a Member State, in accordance with Article 7 (2) of Regulation No 87, from fixing the detailed rules for implementing the provisions relating to the lodging of a deposit laid down in Regulation No 19 and Regulation No 87 itself.